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Reduced revenues for Cryptologic


Lower industry wagering activity, adverse currency factors, and a reduced contribution from a key licensee blamed

Online gambling software developer Cryptologic released its financial results for the three months and full year ended December 31, 2009 this week, showing reduced revenues as a result of lower wagering activity across the industry, adverse currency factors, and a reduced contribution from a key licensee.

Revenue decreased to $39.8 million (2008: $61.5 million), whilst net losses of $35.5 million (FY 2008: $32.7 million) were posted thanks to $24.8 million in non-recurring charges for asset impairments and restructuring to align the company's costs with its revenue base.

Total annual recurring cost base, which comprises operating, general and administrative, finance and amortisation expenses, was reduced by $20.6 million to $55.0 million.

On the positive side, branded games revenue increased to $2.8 million (2008: $300 000), accounting for 7.1 percent of total revenue (2008: 0.5 percent) despite a slower-than-anticipated roll-out by licensees. The company has signed deals with DC Comics to develop betting games featuring Batman, Superman and Wonder Woman; and with Paramount Digital Entertainment for games based on 20 movies including Braveheart, Forrest Gump and Ghost.

Cryptologic's total licensee base expanded by 20 to more than 30 Internet gaming operators that includes Betfair, Sportingbet, totesport and Virgin Games

Fourth quarter 2009 highlights included:

* Branded games revenue up 51.7 percent sequentially to $1.2 million

* The company undertook a major relaunch and investment in its virtual casino lobby to enhance long term revenue opportunities

* The Cyprus office is to be relocated to Malta in order to streamline operations

* Three major licensees signed up for branded games - BetClic, Rank Interactive and UniBet

* Cryptologic launched its first games based on Batman and Wonder Woman as well as Monkeys to Mars, Triple Action Hold'em and Aces and Faces

* Fourth-quarter revenue dropped to $9.93 million from $11.36 million in the previous year. Third-quarter revenues had totaled $9.59 million.

* Internet casino revenue increased to $8.7 million (Q4 2008: $7.5 million). The U.S. dollar was relatively weak during the quarter which increased revenue by $400 000.

* Internet poker revenue decreased to $500 000 from $2.7 million previously, primarily due to the transition of the poker network to GTECH, where online poker revenue increased 8.4 percent from the third quarter as the company optimised the GTECH environment.

* Branded games revenue was $1.2 million for the three months ended December 31, 2009, compared to $300 000, as the number of revenue producing games increased to 66 from 33.

In 2010, Management expects to see improved revenue from its hosted casino operations as new licensees go live and existing licensees benefit from Crypto's investment in major rebranding, a new lobby and advertising initiatives.

The popularity of branded games should continue to gain momentum with the annual run rate currently at $5 million as more games come on stream; licensees have launched 74 branded games to date, leaving a backlog of around 125 games.

Costs are expected to decline further as additional measures are implemented to manage overheads

Chief Executive Officer, Brian Hadfield, said: "2009 was a tough year as a number of adverse factors including a global economic downturn overshadowed the company's progress in implementing its innovative new strategy to reduce costs and return to growth.

"We have entered 2010 in better shape with a substantially reduced cost base that will continue to be managed tightly. At the same time, new business momentum remains encouraging as branded games continue to roll out and hosted casino licensees implement new initiatives. With new licensing activity staying strong and the overall online casino/gaming market showing some improvement, we look to the year with cautious optimism."

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